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ESOP's - what does SEBI SAY? |
Following are some of the guidelines issued by SEBI in respect of Employee Stock Option
Plans:
1. Issue of stock options at a discount to the market price would be regarded as
another form of employee compensation and would be treated as such in
the
financial statements of the company regardless of the quantum of
discount on
the exercise price of the option.
2. Subject to the aforesaid financial treatment, ESOPs would not be covered by
the pricing provisions of SEBI's preferential allotment
guidelines.
3. The issue of ESOPs would be subject to approval by shareholders through a
special resolution.
4. There would be no restriction on the maximum number of shares to be issued
to a single employee. However, in cases of employees being offered more
than
1 percent shares, a specific disclosure and approval would be necessary
in the
AGM.
5. A minimum period of one year between grant of options and its vesting has
been prescribed. After one year; the period during which the option can
be
exercised would be determined by the company.
6. The operation of ESOP Scheme would have to be under the superintendence
and direction of a Compensation Committee of the Board of Directors in
which
there would be a majority of independent directors.
7. ESOP would be open to all permanent employees (whether working in India or
abroad) and to the directors of the company but not to promoters and
large
shareholders. With specific approval of the shareholders, the scheme
would be
allowed to cover the employees of a subsidiary or a holding company.
8. Certain minimum disclosures would be required in the Director's Report or in
the annexure to the Director's Report regardless of whether the stock
options
are issued at a discount or not: the total number of shares covered by
the
ESOP as approved by the shareholders, the pricing formula, options
granted,
options vested, options exercised, options forfeited, extinguishment or
modification of options, money realized by exercise of options, total
number of
options in force, employee-wise details of options granted to senior
managerial
personnel and to any other employee who receives a grant in any one
year of
options amounting to 5 percent or more of options granted during that
year,
fully diluted Earnings Per Share (EPS) computed in accordance with
international accounting standards.
9. The SEBI stipulations prohibiting an initial public offering by companies having
outstanding options should not apply to Employee Stock Options whether
vested or not. If any Employee Stock Options are outstanding at the
time of an
initial public issue by an unlisted company, the promoters'
contribution shall be
calculated with reference to the enlarged capital that would arise if
all vested
options are exercised.
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